FDA wants to tighten its eligibility restrictions for small business waivers of user fees, but industry does not appear interested in changing the rules, even if it would hold down costs for other applicants.

The agency allows application user fee waivers for businesses that previously have never submitted an application to the agency and have less than 500 employees, including affiliates.

However, industry is content with the existing policy language. Representatives said they would not submit modifications to the agency’s proposed changes.

As part of the Prescription Drug User Fee Act reauthorization, FDA is looking to clarify the meaning of the word affiliate in its consideration of small-business waivers, according to minutes of a Jan. 25 PDUFA V Financial Sub-Group meeting.

Typically, the agency considers a firm’s current and former affiliates when making its small business waiver determination. But a recent court case in Illinois, Winston Labs v. Sebelius, indicated the rules could be interpreted as meaning only current affiliates should be taken into account in the waiver decision.

The rule change is targeted at firms that apply for a first-time applicant waiver even though they had former affiliates who already had submitted an application.

FDA said in the minutes its policy always has been to count current and prior affiliates “even if not in existence at the same time” when considering whether an entity really is submitting its first application.

The agency is concerned that allowing only current affiliates would open the door for companies to receive waivers that are not entitled to them. It did not think the rule change would affect a large number of firms, according to the minutes.

Industry argued changing the meaning of affiliate would not conform to the financing model most small businesses use and ultimately could hinder eligible companies from receiving a waiver. Representatives said small businesses are financed over a five- to 10-year period and trying to determine affiliates using a “past-tense inquiry” would be nearly impossible.

Industry said the agency should only consider a “present-tense inquiry” for affiliation, according to the minutes.

Industry: Existing Language Sufficient

FDA has granted more than 300 small business waivers since PDUFA was enacted in 1992. Over the first five year cycle, the agency granted about 50 waivers that covered half the application fee. During PDUFA II, which began in 1997, the rule was changed to allow full fee waivers.

There are no small business waivers for product or establishment fees.

Industry did not seem concerned about the FDA assertion that an increased number of waivers would increase application fees for paying customers.

PDUFA fees for applications with clinical data increased $136,500 to $1.5 million for fiscal year 2011, although that was based on a predicted drop in applications (Also see "FDA Expects Sharp Drop In Drug Applications This Year" - Pink Sheet, 4 August, 2010.).

Industry also proposed holding the agency to a deadline when deciding to deny a user fee waiver, according to the minutes.

Talks about the proposals are expected to continue at future meetings. Both sides have reached agreements on some agency issues, but several still are outstanding as the talks near their conclusion (Also see "PDUFA V Agreement Set In Four Areas, But Broad FDA/Industry Talks Continue" - Pink Sheet, 7 March, 2011.).

Personnel Costs OK For Inflation Adjuster

The question of whether to change the formula that helps FDA determine annual user fee revenue appears to have at least a partial answer: the status quo is acceptable in determining the agency’s staff costs.

Minutes of a Jan. 20 PDUFA Financial Sub-Group meeting indicate both sides agreed personnel compensation and benefits “are represented accurately” in the existing formula and should not be changed.

Annual user fee revenue inflation adjustments are based on factors such as changes in the Consumer Price Index or cost of pay and benefits for FDA full-time equivalents. The formula helps FDA determine the necessary staffing levels, which may be why it has become a PDUFA issue. The state of the economy and federal wage freeze could dent the amount FDA collects (Also see "User Fee Inflation Calculations May Need To Change Due To Slow Economic Recovery" - Pink Sheet, 17 January, 2011.).

Industry asked during a Jan. 18 meeting for an inflation adjuster that takes multiple indexes into account and is more responsive to cost factor changes. Its representatives suggested the formula be based on a shorter period than the five-year rolling average used now, according to meeting minutes.

FDA said at that time a composite of multiple metrics may be useful, but did not want to make the formula too complex.

At the Jan. 20 meeting, FDA said while personnel compensation and benefits (PC&B) mostly drive FDA costs, applying that change to costs not related to PC&B is not ideal. The agency said other measures, such as the CPI, could be used to measure non-personnel costs, according to the minutes.

FDA already had looked at a comparison of local CPI rates during the last decade and showed a model of PC&B and non-PC&B adjuster formulas.

The minutes did not include any industry reaction. Both sides intended to continue discussions at a future session.

By Derrick Gingery

User Fee Waivers For Small Businesses Might Get Smaller Under PDUFA V

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